A smart card is typically a plastic card about the size of a credit card that is embedded with a microcomputer that makes it “smart.” The microcomputer stores information while protecting it from unauthorized access. A smart card that is imbedded with a microcomputer can process data on the card and can add, delete, and otherwise manipulate information on the card. Smart cards are used for a variety of applications, such as storing value, which a consumer can spend in a transaction with a merchant.
The utilization of smart cards for consumer transactions has resulted in a demand for loyalty programs associated with these transactions which award loyalty points to consumers. For example, a consumer using a smart card as a stored value card makes a purchase from a merchant using, for example, a merchant terminal. Loyalty points for the purchase may be put on the card at the merchant terminal by modifying the merchant terminal to accomplish this function. There also must be an intermediate system that collects the points and passes them forward to a host processor or central computer. A great deal of effort and expense is required to initiate such a system, because it interacts with and requires changes to the other terminal software.
Such additions and modifications to terminal software also require significant effort in testing and validation. As such, loyalty systems of this type require a significant investment in equipment, as well as time and centralized management, to oversee the entire process. Another disadvantage of running a loyalty program off a modified merchant terminal is reduction in throughput. Allocating and redeeming loyalty points at the modified merchant terminal increases transaction time, causes longer check-out lines, and creates a need for more personnel. Thus, there is a need for an off-line loyalty program, or a loyalty program which performs loyalty updates as an automatic function of the smart card itself at the merchant terminal, including tracking and redeeming of smart card loyalty points, that can be inexpensively integrated and controlled by local merchants.